May 6, 2020

Proposed Changes to Reg CF: Let the SEC Know What You Think

At KingsCrowd, we want to make sure that you’re well-informed so you can make smart, data-driven startup investments. Beyond the latest companies and our analytics-based ratings, it’s also important to know what’s happening in the crowdfunding sphere in general. Recently, the SEC proposed some key changes to startup crowdfunding that would herald considerable developments. 

We’re going to summarize the major changes/updates that the SEC has proposed below. If you are interested in getting a more in-depth view, the folks at Early Investing had an excellent Q&A with Republic where they discussed the changes and what it could mean for founders and investors. 

 

The Highlights

The biggest change that the SEC is proposing is raising the limit on how much money a company can raise in a 12 month period with a Reg CF campaign. The new limit would be set at $5 million, a substantial increase from the current $1.07 million. This update would be a boon for both investors and companies, as it creates more opportunities all around.

Another key update involves modifying the monetary limits for both accredited and non-accredited investors. Accredited investors would see all investment limits removed, while non-accredited investors would have their investment limit determined by the higher of either their annual income or net worth (it was previously determined by the lower of the two). This change also increases investment opportunities for investors across the board.

Other proposed changes include allowing companies to “test-the-waters” before officially beginning a raise, allowing them to determine if there is substantial interest before they begin the legal process of filing for a raise; updates to the bad actor disqualification provisions; and allowing special purpose vehicles to participate in Reg CF raises. 

 

What Do You Think?

These changes are currently open to public comment here. Now is the time to let the SEC know what these changes mean for investors and to help guide the future of Reg CF raises. The comment period lasts until June 1, 2020.


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